Let’s walk through the mercury problem (H/T: Instapundit).

• Automakers used mercury as a component for various auto systems until 2004.
• They stopped because mercury is toxic, and it gets into stuff that we eat (the actual level of risk is in fact not relevant for this discussion).
• People get very touchy about toxic elements being thrown out with the rest of the garbage, so there’s an industry designed around collecting the mercury at the end of a car’s life.  The big (only?) one of these is ELV Solutions.
• Here’s a list of the car companies that work with ELV Solutions.  Notice which car company isn’t on the list?
• That’s right: GM isn’t on the list.  They exited the program at the beginning of August.
• Autoblog Green calls the reason why “convoluted,” but it’s not.  There are now two GMs.  Good GM is the one with good assets and a chance of actually making money; Bad GM is the one with all the garbage assets, bad debts, and onerous obligations.
• Good GM does not make cars using mercury, and technically never has (its predecessor Old GM did, not it), so it sees no particular reason why it should fund mercury recovery.
• Bad GM… doesn’t make anything, or indeed do much of anything except sit there and slowly decompose; but Bad GM is the one that ELV Solutions needs to talk to about funding mercury recovery.
• No, Bad GM doesn’t have any money.  Money is a good asset, which is why Bad GM doesn’t have any of it.
• No, ELV Solutions is not able to break even on mercury reclamation.  If you could do that, ELV Solutions wouldn’t exist: the car companies would have done the job themselves and directly.
• So now we come to the Cash-for-Clunkers program, which has suddenly put a large number of pre-2004 cars up for immediate destruction (and mercury reclamation).  A lot of those cars were built by the Old GM.
• ELV Solutions is thus stuck for reclaiming the mercury of a major car company’s old vehicles, without getting funded by that car company.
• And, given that there’s no GM ‘flavor’ of mercury, or GM-only junkyards, ELV Solutions is really stuck for reclaiming the mercury a major car company’s old vehicles, without getting funded by that car company.

One last thing, and please note this carefully: none of this is a bug.  The intent all along was to shunt money-hemorrhaging expenses like mercury reclamation to a zombie company that could go belly-up without also killing General Motors.  So don’t expect the administration to do anything about this.  Although I suspect that the hand of the government that was establishing the GM reorganization [did not know] what the hand that was putting together Cash-for-Clunkers was doing… which may mean that (depending on how this all turns out) a seafood diet may be contraindicated again for a couple of years.

Moe Lane

Crossposted to Moe Lane.

[Updated for clarity.]

I suppose there are few of us who hadn’t guessed this, but it would have been nice to have it reported before the administration committed to a bailout:

It’s sure to be a stretch. For the United States to fully recover its investment, the value of General Motors stock will have to reach levels it has never before attained.

“I’m not going to predict it — that’s not my job today,” GM chief executive Fritz Henderson said in a recent interview.

“I don’t know how much we’re going to recover,” a senior Obama administration official said as the company headed into bankruptcy last month.

This uncertainty stems from the difficulty in valuing the 60 percent GM stake that the United States will receive in exchange for the public investment. The government also gets preferred shares and other compensation.

The stake will be worth enough to fully cover the government’s direct investment only if GM’s stock rises above $68 billion. Even at its recent 2000 peak, GM’s stock was worth only $56 billion.

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Right now the Obama team is swearing up and down that General Motors is only going to be a government property for a short time - a few years, at the most. But there’s nothing harder to kill than a federal program. There’s already plenty of evidence that both the White House and Congressional leaders view GM as a jobs program, rather than a company. In my column at American Issues Project, I argue that GM today looks a lot like Amtrak did in 1971:

Now that the Obama administration has taken General Motors under its wing, it’s worth wondering what the exit strategy is. How quickly will the federal government sell its stake in the company, and recover the tens of billions it has loaned GM? It would be nice to think the intervention may be temporary, but the America’s history with federal intervention into the private market is not especially encouraging.

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This is the original:

…annnnnd (via Ace of Spades) this is the parody.

The parody’s better. Not to mention, considerably more honest.

Moe Lane

PS: I don’t know whether this site is Left-oriented or Right-oriented, but I’ll say this: whoever made it is not happy. And he or she is right to be not happy.

Crossposted to Moe Lane.

General Motors filed for bankruptcy protection this morning and President Obama plans to give the bankrupt car maker another $30 billion bailout during and after the bankruptcy process. That will bring the bailout of General Motors to $50 billion.

The $50 billion bailout of General Motors is second only to the $150 billion AIG bailout.

According to the Washington Post, under the proposed restructuring of General Motors, about 60 percent will be owned by the United States, about 12 percent by the governments of Canada and Ontario, a union health trust would own 17.5 percent, and the company’s current bondholders would get 10 percent.

The General Motors bankruptcy filing is long over due and should have occurred long ago and without the $50 billion bailout.

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Barack Obama dismissed Rick Wagoner, and he is reportedly planning to dismiss a majority of GM’s Board of Directors. He also says he wants bold reform, so that General Motors offers the sort of cutting-edge products that the car buyers of today and tomorrow want. He also doesn’t like the Chevy Volt.

So what does Barack Obama expect us to drive? Today’s news gives us reason to worry. Maybe Obama doesn’t want Americans to own cars at all; maybe he expects us to buy this… thing:

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Way to go, General Motors! You’ve staked your survival on electric cars, hybrid cars, and high-mileage cars - apparently reading tea leaves and thinking that was what Obama and Congressional Democrats wanted. Instead, it turns out Barack Obama thinks you did it all wrong. Even more surprising, it’s GM’s high-tech, environmentally-friendly, crown jewel car of the future that was your biggest mistake.

The Chevrolet Volt may wow the media when it arrives in dealerships next year, but the Obama administration believes the plug-in electric car will cost too much and won’t attract enough buyers.

“While the Volt holds promise, it will likely be too expensive to be commercially successful in the short-term,” the administration said in its evaluation of General Motors Corp.’s restructuring plan. The car “is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable.”

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The President of the United States is a man who has succeeded largely by substituting charisma for substance. It’s critically important for him to look like a heavyweight. Understanding this well, the New York Times is obliging Mr. Obama with the headline “Obama Issues Ultimatum to Carmakers,” accompanied by a picture of the Great Man looking stern and powerful by contrast with the non-entities who appear alongside him.

Under the terms of the deal in which GM borrowed emergency funds from the government last December, the company is required to produce a credible operating plan with sharp cost-cutting measures by March 31, or else face a demand to immediately return the funds (thus triggering immediate moves by creditors to liquidate GM). Those of us with eyes knew at the time just how empty a covenant this would turn out to be.

Today, Obama is putting lipstick on the pig. He’s presenting what is called an ultimatum to GM and Chrysler (the beneficiaries of emergency government funds), to shape up or ship out. And they have 60 days to do it. We don’t really know what Obama actually wants to see happen in 60 days. Characteristically, he doesn’t say, which is your cue to add your own writing to his blank slate.

Why am I so cynical? Because the deal was for GM to restructure or die by March 31. Obama just gave them a sloppy wet kiss in the form of a 60-day reprieve, and he wants us to think he was being tough. The only cost that he imposed on GM was the dismissal of CEO Wagoner, whose departure has long been only a matter of time. And I’m betting that 60 days from now, there will be another big dollop of taxpayer funding for GM, accompanied by more harsh words.

And of course, another opportunity to take stern photographs of our Dear Leader.

The big headline yesterday was that GM CEO Rick Wagoner is being dismissed in favor of Fritz Henderson. This isn’t remarkable in itself, because no one expected him to last, despite having the oft-expressed (in public, anyway) full confidence of GM’s board .

Today, the President of the United States is expected to make significant announcements about GM’s warranty policy. No, that’s not a typo, and yes, it’s remarkable. I didn’t say the President of General Motors, I said of the United States.

Since when does an urban agitator and small-time legislator with a law degree think he can run an enterprise with 100,000 employees, thousands of vendors, millions of customers, and operations in every part of the world? Well, that’s one of those questions you’ll just have to ask the people who voted for him last November. I can shed some light on the rest of this.

And there’s another really remarkable aspect here, which speaks either to tremendous political skill or luck among the Democrats: they kept the whole thing out of the news for the last three months.

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The Wall Street Journal reports that the Obama administration is prepared to recommend billions in new ‘loans’ to America’s automakers, as long as they meet certain requirements. But once you get past that headline, something very disturbing becomes apparent: Obama’s task force never really considered a bailout on the merits, but concerned itself only with how to structure it. The decision to pour tens of billions more into Chrysler and GM was apparently made before the team was ever named.

Interviews with task-force members indicate that the administration doesn’t want to let General Motors Corp. and Chrysler LLC slip into bankruptcy protection, a course advocated by some critics of the industry. Instead, the task force is expected to say that it sees viable futures for both GM and Chrysler, but only if there are sacrifices from their managements, unions and GM’s bondholders. The team will also lay out a firm timeline for action.

The government is prepared to lend the companies more money. The two companies have requested $22 billion more — including $9 billion for the second quarter. But the task force may not disburse new aid immediately, choosing instead to preserve that as leverage…

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By any reasonable measure, GM, or at least its North American operation, is mortally wounded. The auto industry in the US is a mature one with very little room left to grow. The industry in general, and GM in particular, is saddled with excess and inefficient manufacturing capacity, extortionate union contracts which, for reasons known only to them, management agreed to, and enormous pension and health care liabilities to a pool of retirees which now outnumbers current employees.

At this juncture we’ve “loaned” GM $13.4 billion and GM’s CEO Rick Wagoner is asking for $16.6 billion more if it is to survive. Let’s not kid ourselves. Unlike the Chrysler bailout (for a much better analysis of what the 1979 bailout did and didn’t do, you should read James Hickel’s The Chrysler Bailout Bust), we’re not getting this money back and if $13.4 billion didn’t stop the hemorrhaging, then another $16.6 billion is just a larger band aid.

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GM’s auditors are talking about bankruptcy for the automaker:

General Motors Corp.’s auditors have raised “substantial doubt” about the troubled automaker’s ability to continue operations, and the company said it may have to seek bankruptcy protection if it can’t execute a huge restructuring plan.

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